THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEO CLIP) ANNOUNCER: A startling flashback to the Iran hostage crisis. Did the country's president-elect help seize the U.S. embassy a quarter century ago?

DON SHARER, FMR. HOSTAGE IN IRAN: As soon as I saw the face, it rang a lot of bells to me.

ANNOUNCER: Hillary Clinton's would-be Senate rival speaks out.

ED COX, (R) NEW YORK SENATORIAL CANDIDATE: She's more concerned about the polls in Iowa and New Hampshire than the priorities of the people of New York.

ANNOUNCER: Likely Republican candidate Ed Cox joins us for his first national TV interview.

A case of Hollywood fatigue in California. Is Governor Schwarzenegger's star power starting to work against him?

REP. TOM DELAY (R) TEXAS, HOUSE MAJORITY LEADER: It's a bag of rocks falling out of the sky that sooner or later's going to land on somebody's underprivileged family home.

ANNOUNCER: Tom DeLay and other House Republicans see a crushing blow.

Now live from Washington, CNN's INSIDE POLITICS.

(END VIDEOTAPE)

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well thanks for joining us, I'm Suzanne Malveaux. We are just moments away from a news conference by NASA officials on whether they're ready to go ahead with the first space shuttle launch since the Columbia disaster in 2003. We'll go to it live when it happens.

But first, Bush administration officials were already unsettled by the new election of a new hard-line president in Iran. And they're probably not feeling any better about Mahmoud Ahmadinejad today given new questions about his past. Some Americans who were taken hostage at the U.S. embassy in Iran say they are certain the president-elect was one of their captors over 25 years ago.

(BEGIN VIDEO CLIP)

WILLIAM DAUGHERTY, FRM. HOSTAGE IN IRAN: I remember seeing him acting in a supervisory or leadership capacity during the first, I would say, two-and-a-half weeks.

SHARER: As soon as I saw the face it rang a lot of bells to me. And it was a recent picture. But he's still -- looked like a man, take 20 years off of him, he was there.

(END VIDEO CLIP)

MALVEAUX: Now, compare these pictures for yourself. On the left is a picture of Mahmoud Ahmadinejad in 1979. The man on the right is one of the captors in the Iranian hostage crisis back then.

Now, we don't know if he's Ahmadinejad or not. We do know that Ahmadinejad was a member of the student organization that planned the U.S. embassy takeover in 1979. But Iranian officials and a well-known leader of the hostage takers deny the president-elect had anything to do with the 444-day hostage crisis.

The Bush administration says it is looking into the allegations about Ahmadinejad's past. Let's bring in our White House correspondent Dana Bash -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, Suzanne.

Well today, from the president on down, the White House has said that they are taking these allegations very seriously. And as we speak, U.S. officials are looking into trying to figure out whether they are actually true.

Now, as for the president, he did an interview earlier today with foreign journalists. I'm going to toss it back to you now, Suzanne, I understand the NASA press conference is about to start.

MALVEAUX: We're going to go straight to the NASA news conference at this moment.

UNIDENTIFIED MALE: After that we'll start off with -- let's go with Jay, Jay Barberie.

QUESTION: I agree with NBC, MR. Griffin. I understand you're down to about a day-and-a-half of pad time left now that you're going. Does that give you any problems as far as trying to make the 13th?

UNIDENTIFIED MALE: Well, if we're going to get into details like that, I'm going to turn it down to Michael Leinbach who is the launch director, somebody who actually knows something.

MIKE LEINBACH, LAUNCH DIRECTOR: Well, we have more than a day and a half, Jay. We're counting about three-and-a-half days right now. We have a little bit more work to do on our hyperload, it may bleed into Saturday morning. But then we'll have Sunday and Monday off and a day before launch countdown also. So it's more like three- and-a-half days. We feel really good about processing. All right. Let's go with Bill Harwood.

QUESTION: Bill Harwood, CBS News. This is either for Mike, I guess, or maybe Bill Parsons. Can you give us a sense of however open paper is left? And what you have to do to get that closed out to your satisfaction in time for the 13th? And also, is there an issue with I guess body flap or certification on that, has that gone away or do you have to get some kind of waiver to fly with that?

UNIDENTIFIED MALE: Well, it's probably Mike Leinbach probably has some answers about the open paper here at the pad or at the launch site. But from an open paper standpoint, we have a number of exceptions to the certification of flight readiness that have to be worked off between now and the L minus two.

We have a program requirements control board scheduled for the 7th of July, which -- it will also go on the 8th of July -- and that's where we'll address -- we've got some hazard reports we have to close out, a few other pieces of open paper. And the majority of that paper will be closed at those two PRCBs. And then as we work on towards L minus two there's a few other things that will be closed out as we get closer to the L minus two.

As far as the body flap actuator. There's still a little bit more work we need to do on that. We heard a preliminary story at the FRR. It looks like we will be able to clear this with flight with no problems.

But again, they have a little bit more work to do. They'll bring it to the PRCB next week and I think we'll be able to close that out.

UNIDENTIFIED MALE: Let's go right up front here.

QUESTION: Hi. Irene Clots (ph) with Reuters. Is it possible...

MALVEAUX: We apologize for that problem there, but NASA officials announcing they will go for launch on July 13 we are told. And we understand, of course joining us our space correspondent, co- host of "AMERICAN MORNING" Miles O'Brien who is going to be giving us some more details about what's coming out of that. But they did say that it looked like they were cleared for flight with no problems which sounds like everything is on board.

Right now we're going to go back to the White House to Dana Bash with that other story. We'll get to Miles in a moment.

Dana, sorry to interrupt there, of course, but this is a very important story for the White House, this whole thing about the Iranian president-elect and perhaps a rather shady past. Go ahead and tell us what the White House is saying about these developments today.

BASH: Yes, sure, Suzanne. As I was saying that the White House says that they're taking this quite seriously. And President Bush even discussed it with foreign journalists in an interview this morning, saying that many questions have been raised by the former hostages, of course, alleging that the newly elect Iranian president was one of their captors. And President Bush said that he's confident that they will get to the bottom of whether or not those allegations are true.

Now, a short time ago the national security adviser Stephen Hadley told reporters that the administration has been following the career of Mahmoud Ahmadinejad for -- as the former mayor of Tehran. They've been following him for some time. But Hadley was very careful to say that they do not yet have all the facts.

(BEGIN VIDEO CLIP)

MICHAEL BRADLEY, NATION SECURITY ADVISER: We're looking into these reports. Obviously one of the things you do when you get a report like this is look back and see what you have in the files. And that's the process that's going on now.

(END VIDEO CLIP)

BASH: Now, as I was saying earlier, what the White House is doing and across the U.S. government, is digging into old files, comparing photographs, old footage, maybe even doing interviews to try to get to the bottom of whether or not the allegation is true.

Others, though, are privately debating a long list of what-if's. And what if is what if it is true? What are the implications?

Now the U.S, of course, does not have diplomatic relations with Iran. The White House has called the election of the new Iranian president a sham. However, as one official put it, there are potential diplomatic and political and policy ramifications that could be unprecedented if in fact this turns out to be true.

For example, would the United States government pursue legal action against the head of Iran? Also the president, of course, has made very clear that he does not deal with terrorists. But the United States is very much behind European efforts to negotiate with Iran to try to get them to stop their nuclear program. So would the U.S. still back those negotiations?

Now, Stephen Hadley acknowledged today that that would be one of the serious problems, perhaps, if this is true. But again, the White House, Suzanne, is being very careful to say that they do not yet have the facts. But they're certainly trying to get them as we speak.

MALVEAUX: Dana, thank you very much. I'm sure you'll let us know what all the facts are. A very complicated story, of course, for the White House.

And let's talk more about the president-elect of Iran as well as the conflict in neighboring Iraq. We are joined by the ranking Democrat on the Senate Armed Services Committee Carl Levin of Michigan. Of course, Senator, thank you very much for joining us.

Today, as you know, a big, big story here is that this group of former American hostages says that Iran's president-elect was one of their own captors. How big of a problem do you think this is for the administration as they try to work with Iran to abandon its nuclear ambitions?

SEN. CARL LEVIN, (D) MICHIGAN: It's a huge problem. It's difficult enough to work with Iran. And this, if anything, would make it more difficult if it's true. But it's kind of hard to figure out what the options would be until the truth has been established on this.

But there are some major challenges ahead in terms of trying to figure out a way to -- that Iran does not go down that nuclear road. And if this president was one of the groups, one of the people that took hostages that were Americans, then our road is even more complicated.

MALVEAUX: Senator Levin, do you find hard to believe that perhaps the White House was not aware of his background? I mean, surely they've done background checks here. That they didn't even realize this?

LEVIN: Hadley said that they've been following him. So I would hope that if in fact he was one of the people who took our hostages that they would have known this before now, if they were really on the ball at the White House. Particularly since they said they'd been following his career.

MALVEAUX: Now let's talk a little bit about Iraq. There have been quite a few people who have said they don't have a plan when it comes to troop withdrawal. You have said, unlike some of your Democratic colleagues, that they should not withdraw unless, of course, first, the Iraqis agree on a constitution by February. The president has said that Iraqis need to know that America is not going to leave before the job is done. How do you really square these two ideas?

LEVIN: Well, the president has given them much too much of a blank check by saying that we'll be there as long as we are needed. That is too open-ended a commitment. That does not put any pressure on the Iraqis to reach a political settlement according to their own timetable. And I don't think we ought to set a date for withdrawal, but we should not make an open-ended commitment to stay there as long as we are needed, is the way the president said it.

And the position that makes the most sense to me -- and Senator Susan Collins of Maine has joined with me in a letter to the president along these lines, is saying to the Iraqis, look, we've given you an opportunity, at a great expense of blood and treasure, that only you can take that opportunity. All of our military people say that there is no military solution without a political settlement inside of Iraq which involves all the factions. You've set a timetable for that settlement. You, yourself, have accepted it in Iraq. That timetable starts August 15th by adopting a constitution.

And then I would tell the Iraqis that if you do not live up to your own timetable and achieve a political settlement and adopt a constitution according to your own timetable, that then we would have to consider all of the options in front of us, including the possibility of our troops departing. Otherwise, it's just an open- ended commitment, which I don't think will push the political settlement which is so essential to ending this insurgency.

MALVEAUX: Now, you have said before that Vice President Dick Cheney, who said the insurgency is in its final throes, essentially presented a rosy-colored scenario of what is happening on the ground in Iraq. But in his address to the nation this week, President Bush did acknowledge that there is hard work that's ahead, that progress in Iraq has been uneven. Do you think that the White House now is leveling with the public, as so many have called President Bush to do?

LEVIN: Well, I think they may be beginning that process, but it's long overdue that they state, objectively and accurately, what the reality is on the ground. And the reality is, according to our top military commander there, John Abizaid, that the insurgency has not leveled off and, as a matter of fact, as he has said, there is an increased number of terrorists coming into Iraq from other countries. That is not last throes of an insurgency, as the vice president said. I'm afraid it's very different from that.

I'm glad that the president did not repeat the last throes line of the vice president because it is totally inaccurate. I'm hoping that the White House is now becoming more realistic. But again, the key will be whether the White House will put pressure on the Iraqis to live up to their own self-imposed guideline for the adoption of a constitution. Because if we let them off the hook on that, we may be there forever.

It will be, then, an unlimited commitment. And I don't think that is acceptable, either to the American people or -- will succeed, for that matter, if it is unlimited, in producing a constitution. Because then the Iraqis, who have these differences internally, politically, will not feel the pressure to come up with a compromise.

MALVEAUX: Thank you very much, Senator Carl Levin. We'll have to leave it there. Thanks for your insights.

We do have breaking news now. A military jet has crashed into a building at Buckley Air Force Base in Colorado. It is not clear what kind of plane was involved or if anyone was injured. Emergency personnel are on the scene. Buckley Air Force Base is East of the Denver suburb of Aurora, Colorado, and houses a number of F-16 jets of the National Guard's 104th wing. Again, we still do not know which type of plane was involved, but a plane has crashed into a building at Buckley Air Force Base.

And now at this moment, we want to go back to that NASA press conference with our own Miles O'Brien to tell us a little bit more of the details coming out of that. A shuttle launch that we understand is going to happen on time. And it sounds like, from what we've heard, it's good news -- Miles.

MILES O'BRIEN, CNN SPACE CORRESPONDENT: Suzanne, this is good news. After two and a half years after the Columbia tragedy, the team there, the shuttle management team, after a two-day review, which is a very difficult and strenuous review at the Kennedy Space Center, voted unanimously to go for that July 13th launch of the space shuttle Discovery, the first flight back since the loss of Columbia. As you have been reading lately and hearing lately, there were some open issues that had been recommended by some of the independent watchdog teams that have been looking over NASA as it made its way toward this return to flight.

Those open issues, like how they would stop that foam from coming off the external fuel tank, which was the root cause of the Columbia disaster, that foam striking the leading edge of the wing. Came to a point where they did as much as they could short of redesigning the vehicle entirely. In other words, every effort has been made. So the decision has been made that the vehicle is as safe as it can be, given all that they have done to it, and in addition to focusing on foam, they have done numerous other improvements to the vehicle and some of the procedures involved in launching it.

And now, they say, it is safe to fly and ready to fly by July 13th. There's a two-week or so window, Suzanne, at that time, for that launch. The first available launch is about 4:00 in the afternoon on Wednesday, July 13th. And if you know anything about the weather in Florida in July. They're going to have a tough time launching with the possibility of thunderstorms at that time. So they may take some time to launch Columbia, but the crew is ready, NASA managers, NASA engineers, say they're ready. And the space shuttle Discovery, barring anything unforeseen, will have its first opportunity to try to launch to the International Space Station on this return-to-flight mission on July 13th -- Suzanne.

MALVEAUX: Miles, we know you'll be ready as well.

O'BRIEN: Yes, I will. Yes.

MALVEAUX: Now we'll get a Republican take on America's future in Iraq from Senator George Allen of Virginia. Does he see a disconnect within his party over the president's policy?

Also ahead, the Supreme Court gets a new tongue-lashing from House Majority Leader Tom DeLay. We'll tell you why he's fuming.

And later, was it a reprieve for reporters facing jail time or a blow to journalism? We'll examine a dramatic legal move in the CIA leak investigation.

(COMMERCIAL BREAK)

MALVEAUX: We continue our discussion now on the situation in Iraq and other issues. I just spoke with a top Senate Democrat. With me now from Capitol Hill to offer a Republican perspective is Senator George Allen of Virginia. Thank you very much, Senator, for joining us.

SEN. GEORGE ALLEN (R), VIRGINIA: Wonderful to be with you.

MALVEAUX: I want to first start with Iraq. There is still quite a bit of debate following President Bush's speech on Iraq. As you know, some of your colleagues are saying that they don't believe that there are enough troops that are on the ground to mount a successful counter-insurgency in Iraq. We did hear from Senator John McCain who said that one of the big mistakes -- a very big mistakes he said early on, was that we didn't have enough troops on the ground and that he says today it is still the case. Some commanders on the ground say it's adequate. Where's the disconnect here? Why the disconnect?

ALLEN: Well, I think there are a lot of folks that are Monday- morning generals and you know, senators all think they have their own views. The president's relying on those generals who are actually on the ground there, recognizing what they need.

It is -- it's a situation where some say: Let's send them more troops; and then there's others on the other side saying: Let's pull our troops out.

And I'm going to listen to General Casey and General Abizaid, they're the ones who know the situation on a second-by-second basis. And the success, as far as the military action, will be not just our troops, but the key thing is the training of Iraqis to take care of their own security, their own police forces, so that they're worried about their communities and their homes, not just relying on the United States and Coalition forces.

And so, that security aspect -- you can argue over how many troops there are to be, but again, the ones who know the best are the ones who are there and they say they have adequate troops. And I guarantee you that if they publicly asked or even privately asked the president: We need more troops. They'd get them.

More importantly, the political progress that's taking place in Iraq, I think, is the most enduring and important one for the future opportunities and security in Iraq and that is: The drafting of their constitution.

MALVEAUX: Now, Senator, I want to talk about Iran, very quickly. As you know, a very big story today: The fact that a group of former American hostages say that they recognize now that Iran's new leader here, perhaps, to be one of their captors back in the '70s.

The White House seems, at this point, to be skirting the issue, because they are still trying to figure out if in fact this is true. But if it is, how does this president, who has said that you're either with us or the terrorists, work with this guy to abandon Iran's nuclear ambitions?

ALLEN: It was going to be difficult to work with him before these allegations. If these allegations are proven to be true, it will make it even more difficult. You'd like to have dialog even with your enemies to see if there's some way, in the case of Iran, that we can find some verifiable way to make sure that whatever nuclear production, if it's allowed for electricity, that it is not used for nuclear weapons. It will make it much, much more difficult, if indeed he was one of those thugs who held our hostages for well over 400 days.

I've been one, as a Senator, trying to get after Iran, Iran's assets for those family members and individuals who were tortured or held as hostages. And that will make it all the more difficult. But we'd have to -- I don't want to pre-judge it until I get all the facts myself.

MALVEAUX: Now, Senator, let's put you in the hot seat for a little bit, if we could. You have been publicly questioning and even critical some of Senate Majority Leader Bill Frist's actions lately, most recently on his decision to bring U.N. Ambassador John Bolton's nomination to the floor without those votes that were required to end this debate.

Now, some are saying that your outspokenness with Frist over all of these issues is, perhaps, a possible 2008 campaign. What is it?

ALLEN: I think you've mischaracterized my advocacy of John Bolton. I'm on the Foreign Relations Committee and I think John Bolton's the right man to be representing the United States and the $2 billion we send every year to the United Nations.

They're in dire need of reform. When we finally got him out of committee, I wish we would have voted on him right away and I'm not critical of the leader, he voted right on it.

And so, I think people like to, you know, create controversy where there is none. But I'd sure like to see the Democrats stop filibustering on John Bolton and get off their cushy seats and vote yes or vote no, because the American people, I think, want a watchdog, not a lap dog in the United Nations.

MALVEAUX: And Senator, real quick, a 2008 run, are you going to make some news here for us on INSIDE POLITICS?

ALLEN: Suzanne, I'm worried about reelection next year. My father's a football coach who said the future is now, so I'm focused on my job at hand and I've been encouraged by many people I respect to seek such office, but right now, I'm focused on reelection in 2006 and advocating good common sense Jeffersonian conservative principles and making sure this country's more competitive for investment and jobs.

MALVEAUX: OK. Thank you very much. Senator George Allen of Virginia.

ALLEN: Merci beaucoup.

MALVEAUX: The Supreme Court has spoken, but some members of Congress say they will have the final say.

Coming up, some unlikely allies plan a response of the court's recent decision on the power of local government to seize private property.

(COMMERCIAL BREAK)

MALVEAUX: Am update on a story we reported on early out of Buckley Air Force Base in Aurora, Colorado: A military aircraft crashed into a building a short time ago. This is video from CNN affiliate KMGH's helicopter flying over the base, which shows the building and the military jet.

It is not clear what kind of plane was involved or if anyone was injured. Emergency personnel are on the scene. Earlier, we showed pictures, also, from Colorado that were actually of a separate hotel fire, not the plane crash. This is the video of the plane that, again, has crashed into a building at Buckley Air Force Base in Colorado.

We will continue to follow this story as it develops.

Coming up: She's an odds-on favorite to win reelection next year. But that's not scaring off would-be rivals.

When we return, I'll talk with Ed Cox who may take on Senator Hillary Clinton in next year's contest

(COMMERCIAL BREAK)

MALVEAUX: As the markets close on Wall Street, I'm joined by Kitty Pilgrim in New York with "The Dobbs Report." Kitty?

KITTY PILGRIM, CNN ANCHOR: Hi, Suzanne. Well, stocks turned sharply lower this afternoon. Right now, the Dow Industrials down more than 100 points. Or a little bit less right now. We're bouncing around a bit. Nasdaq down more than half a percent. This is because the Federal Reserve hiked a key interest rate by another quarter point -- ninth straight increase over the past year.

Bank of America is buying credit card company MBNA for more than $35 billion. This deal makes Bank of America the largest credit card issuer in the country, more than even American Express. The deal will result in 6,000 job cuts.

Former WorldCom CEO Bernie Ebbers has agreed to give up nearly all of his assets, including his home in Mississippi. Now those assets are valued at some $40 million. He'll be left with money to pay legal bills and a modest living allowance. He was convicted in March. Will be sentenced in about two weeks.

Flight attendants at United could begin walkouts as early as tomorrow, disrupting service at the busy holiday weekend. The company today completed its plan to transfer its pension plan to the federal government. The flight attendants' union says that triggers the right-to-strike provision.

A House panel today approved the Central American Free Trade Agreement that's known as CAFTA, and the full Senate is debating it now. Coming up CNN, 6 p.m. Eastern on "LOU DOBBS TONIGHT", we talk to some critics.

(BEGIN VIDEO CLIP)

LORI WALLACH, CITIZENS' GLOBAL TRADE: Today's so called "trade agreements" aren't mainly about trade. In fact, what they cover is a whole set of rules and priorities and policies for how we operate our country inside our borders. (END VIDEO CLIP)

PILGRIM: Also tonight, new concerns about bird flu. As Vietnam confirms its human death toll has climbed to 39, we look at what the United States is doing to fight the disease. The president of the Western Growers Association tells us why he thinks China's farming industry is a threat to our national security. Plus, the Veterans Affairs Department is dealing with a major budget shortfall, and Congressman Steve Buyer and Senator Patty Murray join us to talk about that.

All that and more, 6:00 Eastern, "LOU DOBBS TONIGHT". But for now, back to Suzanne.

MALVEAUX: Well, thanks, Kitty. Now back to INSIDE POLITICS. As Senator Hillary Clinton's spokesman tells it, she's not paying much attention to her potential Republican rival or letting him get under her skin. Likely candidate Ed Cox let loose with some tough criticism of Senator Clinton when he announced his campaign exploratory committee yesterday. We'll talk to Cox in a moment, but first, our national correspondent, Bruce Morton, has more on a bitter race in the making.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice over): Senator Hillary Clinton at a Wednesday evening fundraiser in Alexandria, Virginia, just across the river from Washington. She is at ease with crowds these days.

SEN. HILLARY CLINTON (D), NEW YORK: But then in '06, let's elect Democrats so that we can take back the Congress. (APPLAUSE)

MORTON (voice over): She probably has an opponent. Ed Cox, a 58-year-old lawyer who has never run for public office has formed an exploratory committee for the race.

ED COX, POSSIBLE N.Y. SENATE CANDIDATE: I believe that a senator should focus less on making headlines and more on producing results.

MORTON: Ed Cox? If you're old enough, of course you remember. He is the late-President Richard Nixon's son-in-law. Married Tricia Nixon in a White House wedding back in 1971.

At his announcement press conference, he attacked Clinton as a carpetbagger, a tactic which did not work for Republican Rick Lazio, who ran against her in 2000.

COX: She parachuted into New York solely for the reason of running for the Senate, and now she's running for the presidency. How can she focus on the problems of New York if she's really thinking of running for the presidency? She is more concerned about the polls in Iowa and New Hampshire than the priorities of the people of New York.

MORTON (voice over): Cox may have primary opposition. Westchester County District Attorney Janine Pirro is thinking about it.

At a Virginia fundraiser, New York's 57-year-old junior senator was talking about the lack of bipartisanship in Congress.

CLINTON: It is a little discouraging because I feel like we don't get much of a dialogue in Washington anymore. You know, there's not much of an opportunity to really give and take. It's kind of their way or the highway. And I don't think that serves our country well.

MORTON (voice over): Cox has assembled an experienced staff -- money people, direct-mail people and so on -- but the early favorite? That's easy.

MAURICE CARROLL, QUINNIPIAC POLLING INST.: Everybody who's polled show she's a runaway winner. Now, could something happen? Sure. But at this stage of the game, 25 percent or thereabouts for whoever the Republican is, and whomp, she takes the rest of it.

CLINTON: Thank you all, and God bless you.

MORTON: But it isn't over till it's over. In politics, a week can seem like forever. And this election is more than a year away.

Bruce Morton, CNN Washington.

(END VIDEOTAPE)

MALVEAUX: Well, with us now from New York, potential GOP Senate candidate Ed Cox. Thank you very much for joining us. Of course, yesterday, you announced you have formed a Senate exploratory committee, and you've got some big name backers, one of them Henry Kissinger. When are you going to make your final decision on a run?

COX: Well, we want to build a team for this campaign, and we want to build the issues on which we're going to run the campaign. I think a decision would come sometime in the fall or early winter.

MALVEAUX: Now, have you said that unlike Senator Clinton, you are a lifetime New Yorker. But Senator Clinton said, we quote here, that "I am focused on winning reelection. That is what I work on every single day, as I have worked my heart out for the last four years. I think that many people in New York know how hard I've worked. I've tried to bring people together from upstate and downstate and from one end to the other. And I'm going to continue doing that every day. I'm not going to get diverted. I'm going to stay focused on what my job is as the senator from New York."

So she doesn't seem to be biting the argument here that she's ready to leave.

COX: Well, I can see her focusing on reelection. She wants to have a cheap and easy win so she can go on and run for the presidency. You know, she has not produced results for New York. She promised 200,000 jobs for upstate New York in the last campaign, in 2000. And the upstate newspapers are now asking, Mrs. Clinton, where are those 200,000 jobs that you promised? She has not been able to deliver for New York. And there's a reason for that. She's not in power in Washington. Her party's not in power in the White House. It's not in power in the Senate. It's not in power in the House. She just doesn't have the ability to move legislation to better the state of New Yorkers.

MALVEAUX: Well, of course, we're talking about New York state. And let's talk about your strategy here for labeling Senator Clinton a carpetbagger. It was unsuccessful for the GOP in her first election against Rick Lazio. Now Senator Clinton, she's lived in New York for four years. Recent polls are now showing that she has won over independents and even some of your Republican colleagues. What makes you think it's going to work this time?

COX: Well, New Yorkers are very pragmatic. One-third of New Yorkers split their tickets. They are looking for a representative in Washington with a record who can perform in Washington. And I have the record to do that. I will match my record in Washington when I served in the Reagan administration, when I served in the forefront of the consumer protection movement and my record here in New York state over the last 20 years, where I've been a leader in education, I've been a leader in the environment, I've been a leader in job training and job creation and rebuilding our aging infrastructure. And in all those areas, I have a record here in New York, I have a record in Washington. I'll match that against her any time. And I think when people look at my record and see that I will be able to deliver for New York, those ticket-splitters will say, well, what -- will ask themselves, what has Mrs. Clinton done for New York?

MALVEAUX: Well, let me ask you this.

COX: And the answer to that is, she hasn't been able to perform.

MALVEAUX: But you're going to face a tough challenge with Senator Clinton. But also, if you look at some of the numbers within your own party, 46 of New York's 62 Republican Party county chairs, including the state party chair from Westchester County, District Attorney Janine Pirro, they sent a letter urging Hillary Clinton to run. I mean, does your candidacy have the support from your own party?

COX: We're sounding like Democrats, aren't we, fighting among ourselves. Actually, in the end, we will be unified. This is -- we're deciding who the best candidate is to run for different positions. Mrs. Pirro is a prosecutor in Westchester County. And I know many are close to her and many others in the state are urging her to run for the attorney general position. I think that my record qualifies me to run for the Senate and to run a good race against Mrs. Clinton.

MALVEAUX: And last question, of course, real quick here. Name recognition, very important. A lot of people know Hillary Clinton. Many people know you for accomplishments, but also for your wedding to Tricia Nixon, the late-President Nixon's daughter. Now, not to cause a family feud here, but is this a benefit or is it going to be a liability here for your race? COX: Well, no, this race is going to be about the future. It's going to be about issues. And if you take Mrs. Clinton's policies with respect to taxes, she's for higher taxes. Higher taxes in New York at this point in time would strike a dagger in the heart of the New York state's economy. We don't need her policies. We need the policies of lower taxes for New Yorkers.

MALVEAUX: Ed Cox, thank you very much for your time.

COX: Thank you.

MALVEAUX: And good luck to you.

Now we head cross-country to California and Governor Arnold Schwarzenegger's seemingly nonstop campaign. This is the cutoff day for ballot initiatives to qualify for the November 8 special election called by the governor.

As our senior political analyst Bill Schneider explains, Schwarzenegger's fledgling political career isn't playing out exactly as planned.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: When Governor Arnold Schwarzenegger addressed the California legislature in January, he seemed to have a script in mind.

GOV. ARNOLD SCHWARZENEGGER, (R) CALIFORNIA: If we here in this chamber do not work together to reform the government, the people will rise up and reform it themselves. And you know something? I will join them. And I will fight by their side.

SCHNEIDER: Sounds like "War of the Worlds," but the movie that's coming out looks more like kindergarten cop according to one commentator.

PHIL MATIER, SAN FRANCISCO CHRONICLE: We sort of wound up with a playground fight.

SCHNEIDER: You know what happens to Hollywood scripts? There was an original story line.

MATIER: When Arnold said he was going to come up against the legislature, the special interests and business as usual, people said OK, we can go for that.

SCHNEIDER: That came out as something completely different.

MATIER: When he started defining special interests as firefighters, teachers, cops, and the like, rather than the bureaucracy, there was a complete change in people's attitudes.

SCHNEIDER: The audience paid to see the Terminator take on politics as usual. Instead, many feel they're getting Conan the Barbarian picking on the little guys. The climax of this movie comes in November when Governor Schwarzenegger has called a special election.

SCHWARZENEGGER: With the people's help, there will be reform.

SCHNEIDER: As of today's deadline, eight measures have qualified for the ballot, including three backed by Schwarzenegger. They deal with technical matters: teacher tenure, state spending and redistricting. Only one of them, the one that imposes tougher teacher standards, looks popular right now.

The danger for Schwarzenegger is that the special election could end up becoming a referendum on him. How would that turn out? A field poll asked California voters if they would be inclined to reelect Schwarzenegger right now. A solid majority say they want to recast this picture. Schwarzenegger runs slightly behind two largely unknown Democrats who say they will run against him next year. State treasurer Phil Angelides and Steve Wesley, state comptroller.

What happens if you pit Schwarzenegger against actor directors Rob Reiner and Warren Beatty? They're better known than the politicians, but they don't do as well. Could it be that California is experiencing Hollywood fatigue?

(END VIDEOTAPE)

Well, it's been a bad year so far at the box office. And what's got into Tom Cruise and Russell Crowe? Maybe all of that is having political repercussions.

MALVEAUX: Thank you very much, Bill Schneider.

Turning to our Thursday "Political Bytes," California Democratic senator Dianne Feinstein looks to be in a strong position heading into her 2006 reelection campaign. In a head-to-head hypothetical match-up with GOP governor Arnold Schwarzenegger, Feinstein leads 62 percent to 32 percent in a new field poll of Golden State voters.

When the senators matched up against current secretary of state and one-time California resident Condoleezza Rice, she is favored 56 percent to 38 percent.

Democratic party chairman Howard Dean would probably like to forget his now infamous scream following last year's Iowa caucuses. Yesterday, however, South Carolina Republicans staged a Dean scream contest to coincide with Dean's planned visit to the Palmetto State.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Yes!

UNIDENTIFIED MALE: Yes!

(END VIDEO CLIP)

MALVEAUX: The group of high school and college Republicans did their best or you might say worst Dean impersonations. By the way, Dean never made it to South Carolina last night, stormy weather forced him to cancel his trip.

Now, some journalists fear a chilling effect. Now that two -- a source two journalists' refused to name is being revealed to the court. We'll consider the ethics and the possible fallout of the new move by "Time" magazine.

Also ahead, anger over the 1979 Iranian hostage crisis still lingers for many Americans. And new allegations about Iran's president-elect may be rubbing salt in old wounds.

Both those stories are fueling outrage online. Feel the heat when we take you inside the blogs.

(COMMERCIAL BREAK)

MALVEAUX: Last week's Supreme Court decision on the issue of eminent domain granted new powers to local governments that try to seize private property for economic development. The decision also angered some members of Congress in both political parties. CNN congressional correspondent Joe Johns is on Capitol Hill and joins me now for more -- Joe.

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT: Suzanne, the House is taking up a resolution condemning the Supreme Court decision, as well. There's legislation in both the House and the Senate now working its way through.

We've heard this before, of course. The Supreme Court makes a decision, then the Congress of the United States gets up in arms about it. And that's happening in fact. As a matter of fact, a lot of conservative groups out in the country are getting up in arms, as well.

Now, this is also happening, of course, over in the House of Representatives. Congressman Tom DeLay and House Judiciary Committee Chairman Jim Sensenbrenner attending a news conference with others today issuing essentially a challenge to the Supreme Court.

(BEGIN VIDEO CLIP)

REP. TOM DELAY, (R-TX) MAJORITY LEADER: This Congress has -- is not going to just sit by -- idly sit by and let an unaccountable judiciary make these kinds of decisions without taking our responsibility and our duty to given to us by the constitution to be a check on the judiciary.

REP. JAMES SENSENBRENNER, (R-WI) JUDICIARY COMMITTEE CHAIRMAN: What all of us who wish to see this legislation enacted into law want to make sure happens is that the federal government's money will not be used to finance taking somebody's property from them to build a strip mall or a hotel.

(END VIDEO CLIP)

JOHNS: On the Senate side, Senator John Cornyn of Texas also has a bill that he's working on, hoping to get some Democrats to sign on to that. The fact is, though, a number of liberal Democrats are very concerned about the Kelo decision of the Supreme Court, including Congressman John Conyers of Michigan, also Congresswoman Maxine Waters of California. I talked to her a little while ago about that and she says she's particularly concerned about the effect on poor property owners.

REP. MAXINE WATERS (D), CALIFORNIA: This is an issue that crosses lines, political lines. I think most of us really are steeped in the American dream of ownership of our homes and land. And we hold that very dear. That's something that we think the government should protect, not put at risk. This decision turns that all on its head.

JOHNS: There's clearly another side to this. Of course, this is yet another challenge to the power of the Supreme Court. The other thing is, the Kelo decision stressed that people who had their property taken ought to get just compensation. That seems to be getting lost in the argument.

Back to you, Suzanne.

MALVEAUX: Joe Johns, thank you very much.

Now, that CIA leak story continues to make waves in the blogosphere. Up next, we check in with our blog reporters for a look at what people are saying about this and other issues online.

(COMMERCIAL BREAK)

MALVEAUX: Time Incorporated announced today that it will do what one of its reporters refused to do, turn over subpoenaed records regarding the leak of a CIA operative's name. "Time" magazine, White House correspondent Matt Cooper was facing up to four months in jail for refusing to reveal his confidential sources to a grand jury.

Judith Miller of the "New York Times" was one in the same situation. CNN's special correspondent Frank Sesno has more on "Time's" decision and the questions it raises.

(BEGIN VIDEOTAPE)

FRANK SESNO, CNN CORRESPONDENT: For journalists, this is a nightmare: A reporter ordered to reveal his or her confidential sources. Anonymity is sometimes the price reporters have to pay to get crucial information.

JUDITH MILLER, "NEW YORK TIMES": Confidential sources are the life's blood of what you and I do.

SESNO: Here's how Judith Miller, the "New York Times" reporter caught in the middle of all this, put it last week...

MILLER: If we want something in this country other than the packaged, prepared statements of what the government or corporations want us to know, we need to have peep people, ordinary people, government employees, people who work in large corporations come forward and talk to us about waste, about fraud, about abuse, about the things that are going wrong.

SESNO: On the other hand, journalists are not above the law. That's the premise behind Time, Inc.'s decision to release the subpoenaed records.

Says Editor-in-Chief Norman Pearlstine, "It may have a chilling effect on the free flow of information, it may encourage overzealous prosecutors," but "the same Constitution that protects the freedom of the press requires obedience to final decisions of the courts."

NORMAN PEARLSTINE, EDITOR-IN-CHIEF, TIME INC.: There's no argument for saying no, once the Supreme Court has ruled on a decision. I think that we are a country of laws, not of individuals. And that as journalists who regularly point a finger at people who think they're above the law, I'm not comfortable being one of them myself.

SESNO: Clearly, that's not how everyone sees it. The "New York Times", Judith Miller's paper, says it's deeply disappointed in the news mag's decision to comply. And even before "Time's" decision, Matt Cooper, who works for the magazine and was ready to go to jail to protect his sources, made this distinction...

MATTHEW COOPER, "TIME" MAGAZINE: A corporation is different than a citizen, has different obligations, I think.

SESNO: Raising more tough questions: Is there a corporate standard that's different from a journalistic standard? And if President Richard Nixon complied with the Supreme Court, handing over tapes that ultimately destroyed his presidency, should journalists play by different rules? And what will reporters tell their sources now?

(END VIDEOTAPE)

SESNO: What will reporters tell their sources now, Suzanne? That's the question. It's a question that's causing a lot of consternation in news rooms across the country and around Washington today, because some of the bureau chiefs in this town I've talked to today are worried. One of them, Doyle McManus of the "L.A. Times," says some of his reporters are feeling blow back from sources who say: You going to protect me if I talk to you?

MALVEAUX: So, Frank, what does this mean? Does this mean that there's going to be a chilling effect here because of this scenario? Are reporters really concerned about "Time" magazine's decisions here.

SESNO: No question. No question there's a chilling effect. There's a chilling effect everywhere. OK. There's a chilling effect among reporters who are concerned about how their going to talk to their sources. It's a legitimate point: If you're my source and we're on the phone, you say: Are you going to protect me? What am I going to say to you: Yes, as long as I'm not subpoenaed?

MALVEAUX: So, what about Cooper and Miller? I mean, both of them -- can they go to their sources with confidence and say that, you know, they believe they have their protection or is that basically blown?

SESNO: Well, another question that's raised. And now, we have a dichotomy, right? We have a split: The "New York Times" is standing by its reporter and their reporter still says she's prepared to go to jail. "New York Times" reporters, in the past, have gone to jail over this sort of thing. And so, if you're a source and you're talking to the "New York Times," -- you're a reporter from the "New York Times," you can say: Hey, you know, I'm going to stand by you, I'll go to jail if I have to.

Over at "Time," and we should point out: Time Warner Company, part of CNN, there's another corporate policy that could cause some real consternation.

MALVEAUX: And it's not just the government itself, but we're also talking about, perhaps, chemical plants, we're talking about city hall down the street, where most of wrong-doing is uncovered by these anonymous sources.

SESNO: This is what we have keep in mind: You know, we have no support among the public right now; we're scoundrels, OK? Because people look and they say: Bad information, biased information, all that kind of stuff that's thrown at media today. But the bottom line here is, this is not just about a case like this, where sensitive national security information is involved and this is a peculiar case, a particular one, but it's also about that chemical plant: Are they leaking or not? Your food store: Is it safe or not? The auto plant down the street, the kid's school, the mayor. Journalism is about holding people to account, institutions to account. Sometimes you need anonymous sources to do that.

MALVEAUX: Frank, we're going to have to leave it at there, but thank you very much for your report.

Again, a lot for all of us to think about as well.

SENSO: A quandary.

MALVEAUX: For more on this story of course, we check in with CNN Political Producer Abbi Tatton and Jacki Schechner, our blog reporter -- Jacki?

JACKI SCHECHNER: Hi, Suzanne.

Well, Frank was talking about the chilling effect this is going to have on reporters. It's having a great effect on the blogs. We go over to John Call at BloomJuice.com, one of many who are mortified by "Time's" decision saying, "He wouldn't work for "Time" anyway, but now he certainly isn't going to try." He says, "Watch the sources dry up, pronto. Because when the going gets rough, this is proving that they get going."

Another viewpoint at America Is A Liberal Concept. This is BrunoN.Blogspot.com. He's interested because he's an editor in New York City -- says that "Time" magazine "Dead wrong in this circumstances." Goes on to say, "think about what would happen if this standard were applied in the case of historically significant whistle blowers, guys like Daniel Ellsberg in the Pentagon Papers or Mark Felt, who we now know is Deep Throat.

ABBI TATTON, CNN POLITICAL PRODUCER: And over at Hfdjlksafjd.blogspot.com (ph), Duncan Black, also taking "Time" to task for this announcement today saying that basically "Time" has thrown out the concept of protecting sources out the window, with this decision. "It no longer matters if journalists are going to protect their sources if the people that pay their salaries, their bosses, are going to give them up. The commitment of individual journalists therefore, is completely irrelevant.

SCHECHNER: And I want to shift gears a little bit and tell you about another story they're talking about on the blogs. Is Iran's new president -elect a former hostage taker? Well, Charles Johnson over at Little Green Football is one of many speculating that the answer to that question is a very resounding yes.

He's got photographs from the '79 Tehran embassy hostage situation. And he says that the guy that he's got circled there is either the president or somebody who looks a lot like him.

Now, this is not a partisan issue, but we are seeing a lot of this on the right side of the blogs.

TATTON: Yeah. And back to the left side. I just mentioned Atrios. This is Escaton who up until yesterday was a blogger, now announcing himself -- Escaton, an online magazine of news, commentary and editorial. And you've got the background how all that happened.

SCHECHNER: We'll tell you how this evolved.

So, Duncan Black is one of several bloggers who has been testifying before the Federal Elections Commission over the past couple of days. They have been addressing the issue of who is a journalist, who is a blog. How should campaign regulation be extended into the blogosphere, if it should at all. They are all saying no, it should not.

But Duncan has some questions, wondering why he was treated differently as a blogger than he would be as a media entity. For example, why is Salon.com entitled to the media exemption, but not him. This sparked something.

TATTON: Yeah. Those questions raised over at Escaton. This post here from the talentshow.org, also until yesterday a blog. The site's host realized the potential pit falls of being a blogger in this day and age of potential FEC regulations. So, they've taken drastic measures. They're no longer calling themselves a blog, instead, a web magazine.

They say the content's going to look the same, the site's going to look the same, but the changes as far as the FEC is concerned will be drastic. Just in the name there. Starting tomorrow, my days as a blogger are ending and my days as a writer are beginning. Now, this has sparked lots of different people getting on this bandwagon doing the same thing. They update today looking at some of the sites doing the same thing. One of them is talkleft.com, who declared the day the bloggers died saying that we are now the online magazine for liberal coverage of crime-related political and injustice news. So, lots of people jumping on this.

SCHECHNER: Over at Swing State Project, Bob Brigham doing the same thing, saying he used to be friends with bloggers and now he is friends with members of the press. So you too can improve your social standing with one single post.

TATTON: So, lots of fun posts on this. But this is a very important topic to bloggers with a very important message out there for the FEC. Do not regulate us. We've been saying that all week. And that concludes today's installment, Suzanne, of inside the online magazines, back to you.

MALVEAUX: Abbi, Jacki, thank you very much. Now an update to a story that we have been following this hour. A Navy F-18 fighter aircraft crashed into a building at Buckley Air Force Base in Colorado just a few hours ago. Our affiliate KUSA reports the plane had just landed and was traveling at a slow speed when it hit the wall.

A military spokesman says the pilot was the only person on board and he is being transported to a local hospital for evaluation. The jet is assigned to the naval air station in Virginia Beach, Virginia. The military says a board of officers will investigate the accident.

And Iran's president-elect: as we mentioned, several former hostages at the American embassy in Tehran say he was the one of their captors 25 years ago. How does this complicate U.S. relations with Iran? That straight ahead in "Strategy Session."

(COMMERCIAL BREAK)

MALVEAUX: Welcome back to INSIDE POLITICS. And our "Strategy Session" on today's hottest political topics. With us today, Margaret Carlson, editor at large of "Week" and CNN contributor Bay Buchanan. Thank you very much, both of you, for being here.

Of course, today's topics -- lots to talk about. First, Iran's new president. Is he a hardliner with a past? What does this mean for the Bush administration?

Also, Hillary Clinton's opponent: Richard Nixon's son-in-law announces a possible run for the Senate. He gives a preview of what could turn into an ugly campaign.

And stamp of disapproval: The Mexican government issues new stamps, many including the White House, are calling it racially offensive.

Now, is Iran's president elect a former captor who helped seize the American embassy 25 years ago? That's the question swirling around Mahmoud Ahmadinejad today. The White House says it takes the allegations seriously. The State Department is calling on the Iranian government to come clean. Several former hostages say there's no doubt he's one of their captors.

(BEGIN VIDEO CLIP)

SHARER: As soon as I saw the face, it rang a lot of bells to me. And it was a recent picture. But he's still looked like a man -- take 20 years off of him, he was there. He was there in the background. More like an adviser. And one other incident, he just called Colonel Scott and myself pigs and dogs and we deserved to be locked up forever.

(END VIDEO CLIP)

MALVEAUX: I will not ask either one of you to pronounce his name. It is very difficult. We'll call him the president-elect of Iran. But obviously, this is a very upsetting story for the White House for others here. How much of this really presents a problem for the administration if in fact, he was one of those hostage takers? Margaret, we'll start with you.

MARGARET CARLSON, EDITOR-AT-LARGE, "WEEK": Over at the White House, they're hoping desperately that it's not true. Because he is the elected president, whether the election was full and fair doesn't matter. We're going to have to deal with him. Stephen Hadley spoke as if he's going to have to do the kind of research that's going to take years to figure out if this is the guy. And they're hoping he's got a body double somewhere so that it turns out not to be him, because you don't want to have to cope with it.

MALVEAUX: And Bay, I'm going to ask you to follow up -- let's quickly listen to that sound bite from Stephen Hadley, the national security adviser from earlier today on this topic.

BAY BUCHANAN, CNN CONTRIBUTOR: Sure.

(BEGIN VIDEO CLIP)

HADLEY: We need to get the facts. These are allegations that have come forward. They are allegations at the present time. They raise, obviously, serious questions. That's among the ones you've raised, obviously. We need to take a look at those. We need to get facts. And then we need to see where we are.

Obviously though, this man has now been elected by the Iranian people. It is an election that we think is less than free and fair.

(END VIDEO CLIP)

BUCHANAN: I think what's significant is the fact that Iran has said it is not true. They're denying it outright.

Now, why would they deny it? I think they do not want to offend us. I think that is a significant point here. In addition, he's president-elect, but we have no interest in dealing with this fellow. He supports the nuclear program. He's outspokenly a supporter of it.

In addition to that, I think he is -- we all know the direction he's going to take this country. He is going to try to really curtail the few freedoms they may have now.

So, it's not a guy we want to deal with. I think we deal with Khomeini through the Europeans the best we can on the nuclear program. And we let them all know, don't mess around. Don't send people across that border to Iraq.

MALVEAUX: So, let's talk strategy here, though. Because, obviously, the EU three, the other European countries directly involved in the talks with Iran, they have something at stake here, as well. What is the best strategy for the Bush administration at this point? Put pressure on them to get answers from this leader, from that government to say, look, we're going to cooperate now?

BUCHANAN: In what regard? We do know that this man, this president-elect was involved. He was a student leader of the revolution of the period. And very likely a supporter of the takeover. Was he a guy inside the embassy? We don't know. And why do we care? He is the president-elect. I think if our sources say he is, we acknowledge he is, we think it's a terrible thing. We let the world know and we move on.

MALVEAUX: Margaret, does it matter?

CARLSON: Well, you hope that we can put pressure on others and we can have a back channel to put pressure on Iran because he's vowed to keep up the nuclear program. That's a terrible turn of events for us.

BUCHANAN: Exactly.

CARLSON: He's about the worst person who could have been elected from our point of view. But this is the problem with democracies, sometimes they vote. We don't like the way it happens. And they turn up the wrong person. But we've got to find a way to deal.

MALVEAUX: OK. We'll get back to the next subject after this quick break. The U.S. Senate campaign in New York shaping up as a political smackdown. Nixon's son-in-law, Ed Cox announcing an exploratory committee and saying Hillary Clinton is a carpetbagger who's already packing her bags for the White House. We'll talk about it coming up on "Strategy Session."

(COMMERCIAL BREAK)

MALVEAUX: The "Strategy Session" continues on INSIDE POLITICS.

Margaret Carlson, of course, editor at large of the "Week." And CNN contributor Bay Buchanan. Thank you very much both of you.

This is a classical political match-up here shaping up in New York state. Ed Cox, son-in-law of former President Nixon testing the waters for a Senate run against Clinton in 2006. Cox is already sounding like a candidate, saying Clinton is more concerned about a run for the White House than she is about the people of New York.

(BEGIN VIDEO CLIP)

COX: She parachuted into New York solely for the reason running for the Senate. And now she's running for the presidency. How can she focus on the problems in New York. And she's really thinking of running for the presidency. She is more concerned about the polls in Iowa and New Hampshire than the priorities of the people of New York.

(END VIDEO CLIP)

MALVEAUX: Now, this was a strategy that did not work back in the last election. Why is he bringing this up now? Why do they think it's going to be actually an effective strategy this time around?

CARLSON: I thought it was an effective strategy the first time around. When you think that Hillary Clinton was first lady, she abdicates the White House, she goes to a state she'd only visited as a tourist and runs for the Senate. Now, there's a carpetbagger for you. But she dealt with it. And I'm afraid for Ed Cox's purposes, that's behind her.

And so he is actually moving ahead, which is she's now a citizen of Iowa and New Hampshire as opposed to New York. And it's a reverse kind of carpetbagging.

I don't think that's going to work. So, you remember George Bush had to answer that in his own reelection. And he kept kicking the can down the road. It never became an issue.

BUCHANAN: Exactly.

CARLSON: And he won. And then he ran for president.

MALVEAUX: Bay, does Cox need to adjust his strategy here? Does he need to change the lines?

BUCHANAN: He's got to do a lot of things different. I think it's a weak, a lame opening, to be quite honest. I'd like to see him do a much better job than this.

For one thing, he's not committed yet. And it's hard to raise money when you're not committed, and also to get endorsements, because why would they and take a risk?

The key is, she has $9 million now. She's probably going to have $35 million in the next six months. He's got to start getting serious.

Likewise on the issue, this doesn't work, this doesn't work. If you tell me that New Yorkers wouldn't love to see a New Yorker in the White House, I don't believe that.

CARLSON: It's never worked as an issue, no.

BUCHANAN: It's not going to work. He has to go on issues. The key is, that he has to really be tough, some red meat, go after her, push her so that she has to take tough stands which could possibly hurt her in 2008.

MALVEAUX: Well, Bay, let's take a quick listen, because I talked to him earlier in the show. Is this red meat enough? Let's take a listen.

(BEGIN VIDEO CLIP)

COX: She has not been able to deliver for New York. And there's a reason for that, she's not in power in Washington. Her party's not in power in the White House. It's not in power in the Senate. It's not in power in the House. She just doesn't have the ability to move legislation to better the state of New Yorkers.

(END VIDEO CLIP)

MALVEAUX: Is that a strong enough argument here?

CARLSON: The two things we know about Hillary is that she became a very good Senator, even Republicans say so. And she's cooperated with people like Senator Lindsey Graham, who was one of the House impeachment managers.

This woman has reached across the aisle. And that on milk price supports and agricultural issues and a whole host of issues for New York state, she's actually delivered.

BUCHANAN: Exactly. It's the perception is that she's delivered,. And I believe she's correct that in New York the perception is she's a good senator, he can't make this case. It doesn't work. I mean, he's going nowhere in his opening lines here.

He's got to pick an issue such as immigration that is hot, it's red meat and get out there and start pounding it and get the grass- roots very, very excited. A lot of people out there. Force her to take some stands and make a mistake or two that then can turn into the campaign issue.

But right now, she can ignore him. And she's not going to be hurt whatsoever. She's going to be benefited by this fellow talking about things people don't care about.

CARLSON: She makes so few mistakes, it would be hard to do. But he could get her into a vast right wing conspiracy corner or get her.

BUCHANAN: When she starts going after him.

CARLSON: Yes.

MALVEAUX: Let's -- let's -- we're going to move on to another subject real quick here. New stamps issued by the Mexican government are taking a licking in the U.S. Activists are demanding that the Mexican government withdraw the stamps. We'll tell you what the White House is saying coming up in "Strategy Session."

(COMMERCIAL BREAK)

WOLF BLITZER, CNN HOST, WOLF BLITZER REPORTS: I'm Wolf Blitzer in Washington. Coming up at the top of the hour: Iran's new president. Was he one of the captors who held Americans hostage for 444 days? We'll have the latest.

Coalition forces in the rugged mountains along the Afghan- Pakistani border recover the bodies of 16 victims killed in Tuesday's helicopter crash.

One-hundred-fifty bands all for one cause and it's happening this weekend. Sir Bob Geldof will tell us about Live 8.

All those stories, much more, only minutes away on "WOLF BLITZER REPORTS."

Now back to INSIDE POLITICS.

MALVEAUX: The "Strategy Session" continues on INSIDE POLITICS.

Of course, with us: Margaret Carlson, editor-at-large of "The Week," and Bay Buchanan, as well, CNN contributor, here.

Now, the White House is weighing in on new stamps issued by the Mexican government that some say, are racially offensive. The stamps depict black cartoon characteristics. White House National Security Advisor Stephen Hadley had this to say about those stamps.

(BEGIN VIDEO CLIP)

STEPHEN HADLEY, NATIONAL SECURITY ADVISER: Our position is that there's no place for this kind of thing. It's wholly inappropriate and we've made that clear.

(END VIDEO CLIP)

MALVEAUX: Yes.

Now, the reaction here: Jesse Jackson has caused them offensive. Also, Mark Morial of the National Urban League, is calling for President Bush, as well as Secretary of State Condi Rice, to demand an apology essentially and to retract these stamps here.

Does Mexico, does Vicente Fox here, does he have a problem with this? Does he just not get it?

BAY BUCHANAN, CNN CONTRIBUTOR: It's ridiculous. Our position is completely ridiculous. I have to tell you that: To think that the focus of our civil rights movement in this country is the stamp program of Mexico, suggests that maybe our race problems are all solved here. This is a cartoon character beloved in Mexico, has been for decades and they're honoring the cartoon character and the author or the cartoonist. And that's all this is. There's nothing racist about it. And to say it's inappropriate is enough and let's move on.

MALVEAUX: Margaret, what do you think? Do you agree? MARGARET CARLSON, EDITOR-AT-LARGE, "THE WEEK": Initially I thought: Well, this is Jesse Jackson going postal; that this is just way over the line. Then, I saw the picture and I thought: Well, it is a racial stereotype and it is offensive.

Now, is it something inside the postal department of Mexico that makes it hard to get at? Kind of and we have many issues with Mexico, but I was encouraged that you have Scott McClellan saying something and then it got bumped up to Stephen Hadley, which is -- makes it something of an international incident and it doesn't do any harm to say: This is not what we stand for and it is not what we would do.

BUCHANAN: Objection to whom, is what I ask.

MALVEAUX: We're going to have to let that go at this point. It does come, however, on the heels of Vicente Fox making that statement that people, Mexican workers will do jobs that not even blacks do.

CARLSON: ... Not even a black would do. So, there's something about Vicente Fox that the administration...

MALVEAUX: Again, another problem with the administration.

But, we're going to have to let it go at this point.

Like some members of Congress, a lot of bloggers are still upset about the Supreme Court's eminent domain decision. We will rejoin our blog reporters next to see what bloggers are saying about the new legal power of local government to seize private property.

(COMMERCIAL BREAK)

MALVEAUX: The recent High Court decision has bloggers debating the legal principle of eminent domain. We check, once again, in with CNN Political Producer Abbi Tatton and Jacki Schechner, our blog reporter -- Jacki?

SCHECHNER: Well, Suzanne, sometimes a story hits the blogs and just sticks and this is one such story. Last Thursday, the Supreme Court upheld the local government's right to seize property for private development. And this had blogs, mostly on the right, really, really angry. Conservative blogger MicheleMalkin.com was the big poster on this, initially. She had links to various other sites, also columns and resources. She also had 105 track backs, which means that 105 other blogs linked back to her specifically on this issue.

TATTON: The topic became so quickly popular out there, that one of the aggregator sites that tracks the big stories online created a separate page just for the Kelo decision last week.

You go here to the Truth Laid Bare (ph). They have separate pages on the big topics like Iraq and the Downing Street Memo. And it was last Friday when the Kelo decision got its own page.

You can see all the people blogging this topic, over 500 blogs there, plus the latest post, the most linked-to posts. And the outrage quickly turned to activism.

There's one story out there that we've seen linked to a lot. This is the story of a businessman, Logan Clemens (ph), who has advocated seizing the house, the New Hampshire home of Justice David Souter, and turning it into a hotel. This has the bloggers over at the Volohk Conspiracy, a group of law professors who blog at Volohk.com, saying, "You know what, retaliating against a judge for a good-faith exercise of his duty is not only a bad decision, a bad idea, but it goes against the Kelo decision.

SCHECHNER: OK. So, maybe not a hotel, but BreakDownLane.net has some other suggestions. They say, "New Hampsire is a great tourism state, so why not build Story Land or the Sphinx?" They go down to show a picture of Wal-mart saying, "A pair of Wal-mart staff of legal eagles against judge Souter and find out who'll wins in that one.

Suzanne, we'll send it back to you.

MALVEAUX: Abbi, Jacki, thanks so much.

That is it for INSIDE POLITICS. I'm Suzanne Malveaux.

"WOLF BLITZER REPORTS" starts now.

END

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